What is the Timeline for Selling a Business?
The sale of a business is a highly complex process that involves multiple steps and phases before, during, and after the sale is finalized. When a business owner decides to sell, it is easy to think that it will be a quick process, but that’s simply not the case.
For any business owner looking to sell, there is always a desired schedule somewhere in the back of their mind. Depending on the reason for sale, some sellers may want to expedite the process. While there is no set timeline for a business sale, there are specific steps that owners can take to streamline the process and expedite the sale.
Selling a Business: From Listing to Closing the Deal
For many owners, the first step to selling a business might be narrowing down the sale price, which can be difficult to remain objective. To set realistic goals for timelines and pricing, it is important to fully understand how your business operates daily, as well as the profile being presented to potential buyers, and the market conditions impacting your industry.
The purpose of working with a business broker is to facilitate successful sales, guiding sellers through each step of the selling process. The average timeline for selling a company is between 6-12 months.
- Pre-Sale Research: 1-2 months
- Before a seller even considers listing a business, it’s important to create a full profile. An experienced business broker will work with sellers to compile all the necessary records, financial statements, contracts, assets and liabilities that will impact the value and appeal of your business. This is also the ideal time to gauge the desirability of similar businesses in similar industries. This will enable a broker to create a confidentiality agreement and a list of prospective buyers.
- Marketing to Potential Buyers: 3-6 months
- Brokers have access to extensive networks of prospective buyers and other industry professionals. Instead of marketing to the general public, brokers streamline the marketing process by appealing to potential buyers who are already vetted and qualified. This will maximize marketing budgets as well as maintaining confidentiality.
- Offers & Negotiations: 1-2 months
- Once a business has been presented to a network of prospective buyers, all offers will be brought to the sellers for review and discussion. The timeframe for negotiations will vary based on the number of potential sellers that are making offers or showing interest. During this stage, an LOI (letter of intent) is drafted, and confidential information memoranda are handed out.
- Due Diligence: 1-2 months
- Once an LOI is signed, the due diligence process can begin! This is the time for interested buyers to dive into the details of a business. This will include legal and economic factors that could have an impact on the value of a business.
- Final Agreements: 1-2 months
- Once the due diligence process is completed, purchase agreements are written and signed. When a sale is finalized, ownership is then transferred to the new buyers.
- Post-Sale Transition: 1-6 months
- During the sale process, it’s common for new buyers to incorporate a transition period into the sale terms. These transition periods aim to encourage consistency in daily operations, easing vendors and employees into their new situations.
How Working with a Broker Can Expedite the Sales of Your Business
As an owner, trying to sell a business on your own can open the door to legal issues, liabilities and a whole lot of stress. Brokers are experienced in mergers and acquisitions for businesses of all sizes across multiple industries. Trying to tackle a sale on your own will often result in less favourable terms, lower sale prices and prolonged timelines, whereas a broker can help.
The initial steps to selling a business involve creating your ideal team. Choosing the right broker will help to create a solid framework for your sale. When starting on a sale, the initial stages are a great opportunity for sellers to communicate their plans with the broker, including desired timeframes, price expectations and terms of sale.
Brokers will help sellers to understand which aspects of their business are appealing to prospective buyers, which ones might be seen as obstacles and what can be done to boost the company profile. Everything from streamlining processes, upgrading software and data rooms, or renewing employee contracts can help boost the appeal of your business, encouraging interest and setting the stage for a positive sale experience.
